Post by jeffolie on Oct 29, 2011 7:38:16 GMT -6
Take a "money quiz" just 10 questions, have you peaked?
Take a "money quiz" click here to go to the piece where the "money quiz" starts about 1/3 down on page 1 found on the left side with a place to 'START QUIZ' in a rectangle ... it is only 10 questions which are simple 3 part multiple choice:
www.marketwatch.com/story/our-financial-smarts-erode-quickly-after-age-60-2011-10-27?pagenumber=1
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Oct. 27, 2011, 4:34 p.m. EDT
Our financial smarts erode quickly after age 60
Take our money quiz to see how you stack up against others
more ... www.marketwatch.com/story/our-financial-smarts-erode-quickly-after-age-60-2011-10-27?pagenumber=1
"... financial literacy peaks in the late 40s — those aged 45 to 49 answered on average 6.4 of the 10 questions correctly — and that there was a statistically strong and consistent decline in financial literacy among older respondents.
Those in their early 80s answered on average just 3.3 of the 10 questions correctly.
more ... www.marketwatch.com/story/our-financial-smarts-erode-quickly-after-age-60-2011-10-27?pagenumber=1
" ... cognition peaks in middle age. ... "
Implications for Americans
For middle-aged and older Americans, the to-do list just got a bit longer. “One of the great dangers is that when you reach retirement age, your ability to make financial decisions is pretty strong,” said Finke. “You are near your peak of financial decision-making, and it can be often difficult to acknowledge that after this age, your ability to make decisions is going to decline.”
Task No. 1: Acknowledge that your ability to make financial decisions will decline after age 60. Don’t think this won’t happen to you; it will.
“We already know from other research unrelated to financial decision-making that there are predictable declines in complex decision-making,” Finke said. “It's not unsurprising to see these same declines in financial decision-making.”
Of course, you won’t know that it’s happening when it does. In fact, you’re likely to develop a false sense of security about your ability to make financial decisions given that your confidence — if you’re like most older Americans — will rise over time.
“To me, that's the biggest danger,” Finke said. “That as you age, as you get into [your] 70s and 80s, you don't sense that your ability to make these decisions is declining.”
Task No. 2: Set up a retirement-income plan where you don’t have to make complex decisions as you age. You could delegate those decisions to an expert whom you trust. Or, better yet, a financial-services firm where you are not delegating to a single financial adviser, but to a firm that will take care of your finances as you reach advanced ages.
Investing in retirement
Task No. 3: Consider annuitizing your income, preferably in a straightforward annuity-type product or a mix of annuity and investment products, Finke said. Consider also passive investments that automatically rebalance
Bottom line: Don’t delegate your financial decision-making to the 85-year-old version of yourself, who may not be as capable as the 65-year-old version.
Yes, it’s a tall order to look that far in advance. “It's human nature to procrastinate about making important financial decisions and it's also human nature to be somewhat over-optimistic about our own abilities,” said Finke, who noted the similarities between driving and making financial decisions.
“Studies of driving show that older people don't sense the decline,” he said. But when you show older drivers objective evidence that their abilities have diminished, they start to accept the truth and change their driving behavior. “We can do the same thing in financial services. We can make people aware that this decline is going to happen and that by planning on it and by accepting it, they can achieve a much better outcome,” Finke said.
It might be hard to provide — as we do with older drivers — objective evidence that your ability to make financial decisions is on the decline. The only near-equivalent of the older-driver’s test for financial decisions is the test Finke and his researchers created.
“Our test is really the only objective measure that we have that can show people whether or not their ability to make financial decisions is greater than or lower than average,” said Finke. “The best thing to do, and it doesn't matter how knowledgeable you are about finance, is to start thinking about ways of making your retirement decision-making more passive.”
Another idea: Consider an annual financial-literacy checkup. Have an adviser review the decisions you've made over the past year, Finke said. One idea: Find a fee-based adviser to meet once a year for two to three hours, to “go over your finances so that you are on the right track.”
Finke’s research also points to increased demand for professional services such as financial planning, accounting and legal assistance — services that substitute for one’s own decision-making ability
Implications for policy makers
Plus, Finke’s research has implications for national retirement policy. The trend toward making people more responsible for their retirement security might not be in the best of interest older Americans.
“How much we should be taking decision-making away from older households in order to make them better off?” Finke said. “As much as we like people to be able to make their own decisions and their own mistakes, it can be cruel to force households that are not necessarily well equipped to make complex financial decisions to make them.”
Finke also said it’s time to put teeth into the laws governing the delivery of financial advice. “Many older consumers are sitting ducks,” he said. “They are sitting on a lot of money and their financial decision- making ability may be diminished. The idea that we could expect them to make rational choices about increasingly complex financial products may be unreasonable.”
The National Council on Aging recently noted that older adults represent 12% of the U.S. population, but make up 35% of all fraud victims.
“There is a lot of debate right now about whether or not financial advisers should be legally looking out for the best interest of their client,” said Finke. “And if we are going to suggest that older households begin delegating some of their financial decision-making to an expert then it's even more important that we make sure that those experts are considered fiduciaries.”
The road ahead is long. But with hope you’ll make the right money moves now that you really are older and wiser.
www.marketwatch.com/story/our-financial-smarts-erode-quickly-after-age-60-2011-10-27?pagenumber=1
Take a "money quiz" click here to go to the piece where the "money quiz" starts about 1/3 down on page 1 found on the left side with a place to 'START QUIZ' in a rectangle ... it is only 10 questions which are simple 3 part multiple choice:
www.marketwatch.com/story/our-financial-smarts-erode-quickly-after-age-60-2011-10-27?pagenumber=1
======================================================================
Oct. 27, 2011, 4:34 p.m. EDT
Our financial smarts erode quickly after age 60
Take our money quiz to see how you stack up against others
more ... www.marketwatch.com/story/our-financial-smarts-erode-quickly-after-age-60-2011-10-27?pagenumber=1
"... financial literacy peaks in the late 40s — those aged 45 to 49 answered on average 6.4 of the 10 questions correctly — and that there was a statistically strong and consistent decline in financial literacy among older respondents.
Those in their early 80s answered on average just 3.3 of the 10 questions correctly.
more ... www.marketwatch.com/story/our-financial-smarts-erode-quickly-after-age-60-2011-10-27?pagenumber=1
" ... cognition peaks in middle age. ... "
Implications for Americans
For middle-aged and older Americans, the to-do list just got a bit longer. “One of the great dangers is that when you reach retirement age, your ability to make financial decisions is pretty strong,” said Finke. “You are near your peak of financial decision-making, and it can be often difficult to acknowledge that after this age, your ability to make decisions is going to decline.”
Task No. 1: Acknowledge that your ability to make financial decisions will decline after age 60. Don’t think this won’t happen to you; it will.
“We already know from other research unrelated to financial decision-making that there are predictable declines in complex decision-making,” Finke said. “It's not unsurprising to see these same declines in financial decision-making.”
Of course, you won’t know that it’s happening when it does. In fact, you’re likely to develop a false sense of security about your ability to make financial decisions given that your confidence — if you’re like most older Americans — will rise over time.
“To me, that's the biggest danger,” Finke said. “That as you age, as you get into [your] 70s and 80s, you don't sense that your ability to make these decisions is declining.”
Task No. 2: Set up a retirement-income plan where you don’t have to make complex decisions as you age. You could delegate those decisions to an expert whom you trust. Or, better yet, a financial-services firm where you are not delegating to a single financial adviser, but to a firm that will take care of your finances as you reach advanced ages.
Investing in retirement
Task No. 3: Consider annuitizing your income, preferably in a straightforward annuity-type product or a mix of annuity and investment products, Finke said. Consider also passive investments that automatically rebalance
Bottom line: Don’t delegate your financial decision-making to the 85-year-old version of yourself, who may not be as capable as the 65-year-old version.
Yes, it’s a tall order to look that far in advance. “It's human nature to procrastinate about making important financial decisions and it's also human nature to be somewhat over-optimistic about our own abilities,” said Finke, who noted the similarities between driving and making financial decisions.
“Studies of driving show that older people don't sense the decline,” he said. But when you show older drivers objective evidence that their abilities have diminished, they start to accept the truth and change their driving behavior. “We can do the same thing in financial services. We can make people aware that this decline is going to happen and that by planning on it and by accepting it, they can achieve a much better outcome,” Finke said.
It might be hard to provide — as we do with older drivers — objective evidence that your ability to make financial decisions is on the decline. The only near-equivalent of the older-driver’s test for financial decisions is the test Finke and his researchers created.
“Our test is really the only objective measure that we have that can show people whether or not their ability to make financial decisions is greater than or lower than average,” said Finke. “The best thing to do, and it doesn't matter how knowledgeable you are about finance, is to start thinking about ways of making your retirement decision-making more passive.”
Another idea: Consider an annual financial-literacy checkup. Have an adviser review the decisions you've made over the past year, Finke said. One idea: Find a fee-based adviser to meet once a year for two to three hours, to “go over your finances so that you are on the right track.”
Finke’s research also points to increased demand for professional services such as financial planning, accounting and legal assistance — services that substitute for one’s own decision-making ability
Implications for policy makers
Plus, Finke’s research has implications for national retirement policy. The trend toward making people more responsible for their retirement security might not be in the best of interest older Americans.
“How much we should be taking decision-making away from older households in order to make them better off?” Finke said. “As much as we like people to be able to make their own decisions and their own mistakes, it can be cruel to force households that are not necessarily well equipped to make complex financial decisions to make them.”
Finke also said it’s time to put teeth into the laws governing the delivery of financial advice. “Many older consumers are sitting ducks,” he said. “They are sitting on a lot of money and their financial decision- making ability may be diminished. The idea that we could expect them to make rational choices about increasingly complex financial products may be unreasonable.”
The National Council on Aging recently noted that older adults represent 12% of the U.S. population, but make up 35% of all fraud victims.
“There is a lot of debate right now about whether or not financial advisers should be legally looking out for the best interest of their client,” said Finke. “And if we are going to suggest that older households begin delegating some of their financial decision-making to an expert then it's even more important that we make sure that those experts are considered fiduciaries.”
The road ahead is long. But with hope you’ll make the right money moves now that you really are older and wiser.
www.marketwatch.com/story/our-financial-smarts-erode-quickly-after-age-60-2011-10-27?pagenumber=1